Hollande: 'Lost in election'

Sarkozy asks for a cut in tax on eating out

French President Nicolas Sarkozy has asked his country’s lawmakers to approve cut in VAT to 5.5 percent for the restaurant industry as of July 1, the Elysée Palace announced in a statement.

French President Nicolas Sarkozy has asked his country’s lawmakers to approve a huge cut in VAT for the restaurant industry as of July 1, the Elysée Palace announced in a statement.

The move would see value-added tax for the country’s restaurants fall from the current 19.6 percent to 5.5 percent. In return, the industry pledges to reduce prices and boost hiring as part of a deal to be signed today at the finance ministry, where the catering sector’s "states general" are being held.

The industry has been lobbying government for a tax cut for years. Following earlier pledges by his predecessor, Jacques Chirac, Sarkozy promised to push his European counterparts in Brussels for a cut. The European Union finally issued a green light last year.

The French presidency says the agreement reached with industry representatives includes commitments to "reduce prices, create new jobs, add 20,000 junior trainee positions, improve working conditions and modernise the sector".

If applied by July 1, the VAT cut is expected to take 1.2 billion euros out of this year’s budget and to cost 2.5 billion euros a year thereafter.

According to France’s minister for industry, Hervé Novelli, restaurant owners will reduce the price of many items on their menus by 10 percent.

The agreement is also expected to lead to a new round of negotiations on wages and social security, as well as a crackdown on the black market. France’s leading unions have decided to boycott the states general, however, pointing to insufficient social measures.

Eleven of the 27 EU member states have decided to reduce VAT in the restaurant industry, which employs 900,000 people in France.